Lenovo Not Worried By Death Of EMC Server/Storage Pact, Execs Take Shots At Tucci, Dell As Relationship Ends

Lenovo's landmark storage/server pact with EMC is coming to an end.

Gerry Smith, Lenovo COO and president of the company's data center group, told CRN there was "no question" that arch rival Dell's more-than $60 billion acquisition of EMC this year would end Lenovo's four-year relationship with the data storage giant.

When it was inked just four years ago, the EMC-Lenovo partnership was considered key to Lenovo's legitimacy in the server market, and a key foothold in the data storage market for the PC powerhouse.

[Related: CRN Exclusive: Lenovo Doubling Down On The Channel With New 'Partner Sold Partner Delivered' Services Program]

Now Lenovo executives are essentially arguing the company is better off without EMC as it develops a data center strategy that relies heavily on partnering with a variety of vendors on all-flash, software-defined and hyper-converged solutions without the weight of a large legacy hardware business on its shoulders.

"Would [EMC Chairman and CEO] Joe Tucci have sold to [Dell Chairman and CEO] Michael Dell if he had a bunch of innovative, impressive stuff in the lab?" Smith said during a presentation at Lenovo's recent Accelerate conference.

"We certainly feel the opportunity, where the market is going, presents itself to us in a way that's very different than it'll present itself to [Dell-EMC] because their path will be defined by big mortgage payments," said Sammy Kinlaw, Lenovo's North America channel chief. "We don't have those same mortgage payments. We can afford to move into software-defined in a big way."

"The world has an opportunity to grow software-defined everything," Kinlaw said. "Software-defined data centers. You're either tied to a multi-billion-dollar acquisition with traditional data center computing, or you're moving forward with an unencumbered, unhindered computer company without an anchor. Our partnerships with folks like Nutanix and with RedHat and our newly announced partnership with Juniper enable us to move into worlds of data center that will be faster, cheaper, [and] easier to execute in a way that they will not be able to."

Despite Kinlaw's sanguine outlook, the break-up with EMC leaves Lenovo scrambling for storage solutions to bolster its data center offerings and without a key avenue for raising the profile of its fledgling server business, which finished the fourth quarter with a 7.4 percent worldwide market share, trailing market stalwarts IBM, Dell and HP by wide margins, according to IDC figures.

Smith said Lenovo intends to continue partnering with IBM to sell big blue's Storwize storage system family, and is "working very aggressively right now on some partnerships in new areas of the storage market," including the burgeoning all-flash space. IBM is already in the all-flash market with its FlashSystem line, and Lenovo sells an all-flash hyper-converged appliance in partnership with Atlantis Computing.

"We're aggressively out looking at partnerships," Smith said. "We do have our own Lenovo branded products through our partnership with Dot Hill [acquired by troubled storage vendor Seagate about a year ago] "We see a lot of potential with those products, but you'll see us further up the stack as well with some partnerships to be announced."

Jeremy Burton, current president of products and marketing at EMC and future chief marketing officer of Dell Technologies once Dell closes its EMC acquisition, told CRN that EMC's Lenovo relationship is finished, and added that the pact was doomed from the start by roadblocks faced by Lenovo in the U.S. market.

The pending Dell acquisition is simply the nail in the coffin.

"[Dell's server portfolio is] going to be a pretty high priority," Burton said. "Because ultimately the customer benefits because they get better service and they're going to get a lower cost server environment. At the end of the day, I think that's going to matter the most: servers and price."

Chris Riley, EMC senior vice president of US enterprise sales for channel, partners, and alliances, told CRN that the Lenovo relationship contributed little revenue to EMC over the years.

"I don't think they have the go-to-market capabilities that Dell has," Riley said. "Or the market share. And it was a challenge to get the teams working together. We've had relationships with Dell in the past."

Aman Chadha, manager of vendor relations at Stele Corp., a Whippany, N.J., Lenovo partner, said the EMC execs have a point. "It's difficult to beat Dell on pricing," he said. Also, Chadha said, the way Lenovo and EMC relate to partners and customers varies widely. "Lenovo is simple, easy to work with. It is not easy to work with EMC."

Joe Lore, sales director at Sunnytech, a Woburn, Mass.-based Lenovo partner, also said the EMC partnership may have been a mismatch for North American Lenovo partners not used to selling data center products. "We didn't expect to see any gains from it. That space is higher than we usually focus on. Most Lenovo partners don't play in that space" he said.

Lenovo does about 85 percent of its business through the channel.

The EMC/Lenovo partnership allowed Lenovo servers to be sold as part of certain EMC storage systems; allowed Lenovo to sell EMC networked storage solutions to customers in China; and established a joint venture for the companies to bring network-attached storage to small- and medium-size businesses.

While the EMC/Lenovo relationship was begun with the best intentions, its biggest hurdle was pushback from the U.S. government that it wouldn't "let folks like Lenovo play on grounds of national security," Burton said.

A relationship with Lenovo would have meant dual-sourcing hardware, with non-Lenovo hardware required for U.S. government and certain mission-critical customers like healthcare companies where security was an issue, Burton said.

"We would have to do everything twice," he said. "At some point then, it just doesn't make sense. That's more cost for us. That was a difficult one. We've got a business to run. I think we made the right call, and I think when we get this deal closed we'll move as much as we can over to Dell."